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Corporate India has cut employee cost by 3% on an average in FY21, the economic research team of State Bank of India wrote in its Ecowrap report released on July 19.

“The bottomline of Indian companies shows a significant improvement with triple benefit of low interest cost, expenditure reduction and low taxes,” wrote group chief economic adviser Soumya Kanti Ghosh in the report.

Employee cost

“Employee costs have been cut on an average by 3% in FY21. The maximum cut is in employee costs facing the consumers,” observed the report.

The sectors where employee costs went down markedly included consumer durables, readymade garments, healthcare etc.

Balm on fiscal deficit

The SBI research report stated that collection of corporate tax has been so buoyant in the first two months of the current financial year (FY22) that it reached Rs 43,454 crore, up 2.56 times from Rs 16,981 crore in the same period of FY20. The collection was a mere Rs 1,126 crore in FY19.

The buoyancy substantially helped the Union government to contain fiscal deficit within Rs 1.2 lakh crore, a mere 34% of the Rs 3.5 lakh crore averaged during the same period in FY20 and FY19, said the SBI report.

It also mentions that the jump in corporate tax can help the Centre “comfortably meet its tax revenue goals”.

Reduced debt burden

Commenting on the massive growth in profitability, the report pointed out that even as around 4,000 listed companies reported 5% decline in top line in FY21, EBIDTA and PAT grew by 24% and 105%, respectively over FY20.

“Most important, 15 sectors have now reduced loan funds by around Rs 2.09 lakh crore during the pandemic year FY21. Sectors such as refineries, steel, fertilisers, textiles, mining, etc. have reduced their loan funds in the range of 6% to 64% in FY21,” observed the report.

“The reduction in effective tax rate in FY20 coupled with a prolonged period of low interest rate regime fuelled by the pandemic seem to have been a blessing in disguise for India Inc. during pandemic year.”

Loss of employment

India is one of the countries that has been the most severely impacted by the Covid-19 pandemic said the International Monetary Fund. The pandemic has pushed more than 4 crore Indians into extreme poverty said an IMF report in October 2020 even when the second wave could not be predicted.

According to data released by the Centre for Monitoring Indian Economy (CMIE), as many as 2.27 crore jobs were lost in April and May, the two worst months of the second wave of the infection.

“If we consider the second wave of Covid-19 to have begun in April 2021 then the fall incurred during this wave was of the order of 22.7 million. Of this, 7.4 million jobs were lost in April and 15.3 million in May. June recovered just about a third of this cumulative fall,” said CMIE in its employment report in July.